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Friday, May 29, 2009

Five of the best books on the financial crash

Tim Bennett, a deputy editor at MoneyWeek, named five of the best books on the latest financial crash.

One title on the list:

Fool's Gold by Gillian Tett

Few financial writers have been more closely followed during this crisis than the British Press Awards Journalist of the Year 2009, Gillian Tett. As The Spectator notes, her "analytical and penetrating" articles for the FT have been compulsory reading in City circles for years. Tett is a former anthropologist and so, as Nicholas Shakespeare notes in The Daily Telegraph, she looks at financiers as if at "a strange Tajikistan tribe".

Here, that tribe is a small team at investment bank JP Morgan who harnessed "computers to create a fiendishly complex means of shifting risk from banks to investors" via a new breed of financial instrument, the credit derivative. Once these contracts, which let banks bet on whether a loan or bond might default, infected the subprime mortgage market, mayhem was all but guaranteed with ill-equipped regulators caught "behind the curve at every stage". Tett says only seven people were tasked with monitoring $4trn in Wall Street assets.

Given the subject, it's not for absolute beginners with its "jargon and stupefying numbers", says Dominic Lawson in The Times. But the human aspect more than compensates: using "raw private communications" between players at JP Morgan creates "pathos as well as pace". Tett offers "no solutions", but her account of the widescale failure to control the derivatives market is "devastating".